Unravel the intricacies of TDS under Section 194-O of the Income Tax Act, 1961 effective from 01/10/2020. Explore its applicability, limits, eligibility criteria for e-commerce operators and participants, and grasp the essentials for compliance.
Section 194-O of the Income Tax Act 1961 was introduced in the Union Budget 2020 and came into effect on 1st October 2020. This section applies to e-commerce operators who are responsible for paying any amount to e-commerce participants.
The main objective of Section 194-O is to bring e-commerce transactions under the tax net and to ensure that e-commerce participants pay their taxes correctly. The section imposes a TDS (Tax Deducted at Source) at the rate of 1% on the gross amount paid or credited to the e-commerce participant by the e-commerce operator.
Limits of Section 194-O:
1. Applicability: Section 194-O applies only to e-commerce operators who are resident in India, and whose annual sales or turnover exceeds Rs. 10 crore.
2. Gross amount: The TDS under Section 194-O is deducted on the gross amount paid or credited to the e-commerce participant, which includes the sale value, commission, delivery charges, and any other charges.
3. Threshold limit: No TDS is required to be deducted by an e-commerce operator if the gross amount paid or credited to the e-commerce participant does not exceed Rs. 5 lakhs in a financial year.
Eligibility under Section 194-O:
1. E-commerce operator: Any person who owns, operates, or manages an electronic platform for e-commerce is considered an e-commerce operator.
2. E-commerce participant: Any person who is resident in India and who sells goods or provides services through an electronic platform is considered an e-commerce participant.
3. Gross amount: The TDS under Section 194-O is applicable only if the gross amount paid or credited to the e-commerce participant exceeds Rs. 5 lakhs in a financial year.
4. Permanent Account Number (PAN): The e-commerce participant must have a valid PAN to receive payment from the e-commerce operator.
In summary, Section 194-O of the Income Tax Act 1961 is applicable only to e-commerce operators whose annual turnover exceeds Rs. 10 crore, and the TDS under this section is deducted on the gross amount paid or credited to the e-commerce participant if it exceeds Rs. 5 lakhs in a financial year.
5 LAKH LIMIT IS APPLICABLE ONLY INDIVIDUAL OR HUF